Q2 2022 eBay Inc Earnings Call
Continue to invest and manage towards sustainable long term growth.
Later in the call Steve will go into more detail about our outlook.
One of the most important pillars of our long term plan is our focus category strategy.
<unk> and trust product experience in marketing, our increasing customer satisfaction, leading to faster volume growth.
Last quarter, excluding trading cards focus category at GMB grew nine point faster than the rest of the platform trading.
Trading cards are lower than last year's stimulus fueled results, but volume remains robust at more than double pre pandemic levels.
We are seeing significant outperformance and focus categories globally, although the U S is higher than international the primary reasons for the difference or the timing of launches and category mix by market.
Markets, where we have implemented these changes customer satisfaction remains at or near best in class levels to <unk>.
Majority of our enthusiast by our sharpened focus categories and they are spending levels remain above $3000 per year we.
We continue to see cross category shopping activity consistent with data we shared during investor day in March.
One of our largest focus categories as parts and accessories, which is one of the highest buyer NPS scores on the platform.
We know from experience, how crucial trusted and fitment as one of the best Enablers of Trust.
To ensure every bioscience the perfect part to fit their vehicle, we are enhancing all of the AI that power search merchandising and advertising.
In addition, we have brought out more ways for P&A enthusiasts to discover the wide range of inventory on ebay in our international markets. We have added over 100000 fitment based browse pages last quarter alone.
We also expanded our supply of OEM and certified Green parts.
To drive demand to our huge supply a PMA inventory, we continue to invest in full funnel marketing initial consideration is showing encouraging early signs and we see further opportunity to attract more enthusiasts.
Across other focused categories, we took several steps over the past quarter to expand coverage to enhance our leadership position in trading cards, we expanded authentication services to a wider range of graded items.
In addition, we rolled out a new feature when <unk> can now use the popular my collections tool to track a broader set of inventory, including sports trading cards.
And ebay refurbish, we added more trusted sellers and expanded categories and the program. These included headphones audio gaming consoles and smart home devices.
Refurbished products are growing faster than new products in the same category in part due to increased customer satisfaction.
And then sneakers, we added more products to our catalog, which now includes the top 40 brands across our four largest market.
This expansion reduces friction in selling and buying experiences. We also started authenticating handbags, and Germany, and handbag and accessories, such as wallets and the U S.
The next focus category, where we are innovating and changing the customer experience is jewelry.
Recently, we announced authentication for eligible new and pre owned jewelry items over $500. We are partnering with Gia The Gem Illogical Institute of America <unk>.
Bring 90 years of experience to our partnership like other focus categories will improve the product experienced increased customer satisfaction and change how we market to jewelry enthusiasts overtime.
I am pleased with the near term progress and focus categories and we remain on track to expand coverage and drive growth back towards market rates.
Equally important is evolving our capabilities to attract the next generation of enthusiast buyers in Q2, we took several steps toward that objective in June we marked an important milestone with the opening of the EIA vault. This state of the art facility enables a new format for sellers and buyers to trade and build their collections in real time.
The fault is initially accepting graded authenticated trading cards above $500 and will expand to more products over time.
We're taking advantage of an initial year of free storage and no selling fees for volt sales. This innovation will help us transform many product categories.
One reason that we're excited to launch the ball is because it can enable real time transactions for physical or digital goods. This.
This intersection is nascent but one that collectible enthusiasm are increasingly exploring.
This is part of the rationale behind our second quarter acquisition of known origin.
Margin is an NFC platform that enables artists and collectors to create buy and resell at fts via blockchain supported transactions. There team is highly talented and has extensive technical experience in this rapidly evolving space. They were one of the early pioneers in Ftes and are a perfect fit to make ebay the desk.
Nation to collect and trade.
In the second quarter. We also began to experiment with live commerce, although western market adoption of <unk> shopping remains low we are optimizing our user experience ahead of this emerging trend early pilots have seen users engaged on average for 15 minutes at a time with approximately one fourth of them interacting directly with the event we will continue to.
Optimize this capability in future quarters.
The vault entities and live Commerce, we're all long term strategic opportunities that we mentioned at Investor day, and I'm pleased that in a few short months, we are already making progress in these areas.
Customers are also seeing rapid improvements in payments capabilities, while we continued to build out new services for sellers and buyers. For example, we rolled out additional forms of payment popular with German buyers, especially Gen Z.
Through our partnership with corner consumers can now pay upon invoice or in installments.
We also expanded our buyer FX program, which allows ebay buyers to purchase and the currency of their choice.
Recently, we expanded this global service from a currency over 30 currencies to date, we have seen over 60% adoption unrelated transaction.
These new services are reducing transactional friction for sellers and buyers, while delivering incremental revenue to ebay.
Advertising is also driving growth through innovation despite.
Despite the macro environment AD rates and adoption continue to grow due to the high return on AD spend the sellers experience on ebay.
In Q2, our ads business accelerated faster than volume and delivered revenue that was nearly one 5% of GMB.
<unk> listings drove first party AD revenue to $232 million up 6%. This was 20 points faster than GMB growth are.
Our largest products standard promoted listings grew in the quarter due to conversion optimization and pricing changes are.
Three newer advertising products that we launched last year.
Most 30% versus Q1, the largest contributor was promoted listings at best which saw increased seller adoption and exposure.
Our advertising business remains on track with our long term goals, we outlined at Investor day, and we anticipate that promoted listings will return to double digit growth in the coming quarters.
ESG is a major focus for the <unk> and during the quarter, we made steady progress on our commitments in this space.
Commerce continues to be a huge volume driver on ebay.
As we've shared before non new in season inventory is driving the vast majority of volume on the platform in particular demand for refurbished and used goods is growing in many categories and we are well positioned to hit our long term re commerce scopes.
Ebay has a tremendous impact on the economy beyond our own results as mentioned in our most recent impact report in the U S alone ebay supports more than 1 million jobs.
The vast majority of these jobs come through small and micro business entrepreneur is selling on the platform.
Another meaningful economic impact comes from the generosity of our community ebay for charity allow sellers and buyers to make a positive difference on the world during.
During the quarter ebay for charity raised nearly $56 million up 52% year over year.
And Q2 marked the final power of one charity auction with Warren Buffett raising over $19 million.
Almost two decades. These auctions have raised more than $53 million for glide a nationally recognized center for equity I'm truly inspired by the continued generosity powered by our marketplace.
Finally, the team and I are honored to have received multiple prestigious awards. This quarter. We were recognized as one of Linkedin top companies in retail and we received three women's choice awards in the consumer Internet category best companies for diversity best companies for women and best companies for Millennials I am proud to lead a team of.
Focus is so heavily on the impact we are making in the lives of our employees our customers and our communities.
In closing Q2 was a strong quarter for ebay, we delivered better than expected short term results, while marketing several important milestones towards our long term vision GM.
<unk> revenue and EPS for Q2, all exceeded consensus estimate.
Our focus categories outperformed the rest of the marketplace by nine points, excluding trading cards.
We maintained high NPS scores from MPC aspires to spend more per buyer cut.
Coverage extended to more refurbished products in new categories like jewelry.
We launched the ebay bought the game changing capability that will enable the future of collecting.
We acquired known origin to accelerate our connections between physical and digital.
Our payments team scaled our buyer FX capabilities further simplifying cross currency transactions and rolled out quanta to German customers, our advertising business accelerated faster than volume, putting promoted listings on a trajectory toward double digit growth in the coming quarters.
And ebay for charity raised nearly $56 million, including.
Including a record breaking Powerpoint auction with Warren Buffett.
Before I hand over to Steve I want to thank our amazing team. So it's continued to work hard innovating and exceptional experience for our customers around the world. They are delivering high quality products and technologies that are translating into higher NPS scores and driving long term growth for the company.
<unk>. Thank you for continuing to partner with US your feedback is extremely valuable and helps us create trusted reliable and frictionless experiences.
With that I'll turn the call over to Steve to provide more details on our financial performance.
Over to you. Thank.
Thank you Jamie and thank you all for joining us today.
Ill begin our discussion with highlights from the second quarter on slide 10 of our earnings presentation.
Next I'll review, our key operating and financial metrics in greater detail.
Finally, I'll share our outlook for the remainder of the year and add some closing thoughts before we begin Q&A.
As usual my comments will reflect year over year comparisons on an FX neutral basis, and thus finance otherwise.
Overall I'm incredibly proud of our teams for delivering strong results with some of the most challenging macroeconomic conditions in recent memory.
Our Q CGM Z revenue, non-GAAP , EPS, which exceeded expectations and toward the higher end of that guidance range.
Our second quarter revenue was down 6%, so I have a $2 $4 billion outpacing volume growth by approximately eight points due to contributions from payments and advertising.
non-GAAP operating margin was 28, 7% down nearly four points sequentially due to volume deleverage and the seasonality of marketing spend.
We delivered non-GAAP earnings of 99 cents per share in line with the prior year and.
And we generated $466 million.
Our free cash flow and returned over $1 4 billion to shareholders through share repurchases and dividends during the quarter.
Our strong Q2 results are a testament to the focus and dedication of our employees and the durability of our marketplace and financial model during periods of macro uncertainty.
Let's take a closer look at the drivers of our financial performance in Q2.
Gross merchandise volume declined 14% as we lap the elevated mobility restrictions in 2021.
We also continue to the more challenging macro environment. This year due to a conflict in Ukraine ongoing supply chain challenges and rising inflation across our major markets.
In spite of these headwinds we saw volumes remained relatively stable as we progressed through the quarter with Jim very growing 5% versus our pre COVID-19 baseline in Q2 of 2019.
We continue to scale our investments in long term growth initiatives and observed three points demonstrating our strategy is working.
Excluding trading cards focused categories outpaced the reminder of our marketplace by nine points driven by the continued evolution of the product experience on ebay and growing awareness of our sellers' unique high quality inventory.
Moving to active buyers.
Trailing 12 month active buyers were $138 million during the quarter.
The $4 million sequentially due to the lapping of mobility restrictions during 2021.
We announced the wind down of our Turkey business in June which contributed nearly 4 million active buyers in Q1.
These buyers with gradually rolled off our total comp over the next few quarters.
Excluding hurricane occupiers would have been 135 million in Q2.
Importantly, this closure will not materially impact our financials moving forward.
The <unk> gas buyers made up approximately $17 million of active buyers in Q2.
As we noted on Investor day, we expected some movement between the enthusiasm and mid value buyer groups in 2022 due to the lapping of elevated spending for mobility restrictions and stimulus last year.
Notably over 99% of last quarter's enthusiasts continued to be active buyers on ebay.
But those pas migrating downward the vast majority reminded in our mid Valley group.
Between 200 and $800 per yet.
Importantly average spend among <unk> grew sequentially.
Over $3000 annually up double digits versus 2019, demonstrating the robust demand among his loyal group of ebay shoppers.
Looking at our business on a geographic basis.
U S. <unk> grew 15% compared to Q2 of 2019, while international <unk> was down 3% over the same time period.
The growth differential between our U S and international markets was exacerbated by recent macro and geopolitical developments.
Our European market have been more meaningfully impacted given that proximity to your client.
The U S also benefited from stronger economic growth, leading up to the Ukraine conflict, while our international markets were more exposed to the supply chain challenges impacting cross border trade.
Encouragingly, our focus categories outperforming the rest of the marketplace on a global basis demonstrates not innovation playbook is working across regions. Although the level of outperformance is slightly higher than the U S. Due to the timing of launches on the relative category mix.
Turning to revenue.
Net revenue in Q2 was over $3 4 billion.
Down 6% due to the lapping of mobility restrictions last year and the intensifying macro headwinds over the last few months.
However, revenue outpaced <unk> growth by eight points due to positive contributions from payments and advertising.
As a result, our transaction take rate increased to 12, 4% versus 12, 1% in Q1.
Total advertising revenue grew 4%, while first party ads grew 6% outpacing volume by approximately 20 points.
This represents an acceleration versus Q1 driven by <unk>.
Continued optimization of our standard promoted listings product.
The growing scale adoption and sophistication of our newer AD products and healthy returns on AD spend across our portfolio.
I'm extremely pleased with the momentum our ads business and expect promoted listings revenue to return to double digit growth in the coming quarters.
Managed payments contributed roughly four points of revenue growth during the quarter.
<unk> revenue remained comfortably above $2 billion run rate despite recent volume pressure.
As new services like buyer and seller effects.
In line with expectations.
These new payment services remain on track to achieve $300 million revenue target, we discussed at our Investor day.
Moving to profitability.
Our non-GAAP operating margin was approximately 28, 7% in Q2.
So on roughly four points sequentially, primarily driven by top line deleverage and the advancements of our full funnel marketing strategy.
We also continued to invest in product innovation supporting our focus categories and horizontal marketplace improvements.
G&A expense include exit costs related to the wind down about 30 business, which offset lower employee related costs in the quarter.
We delivered 99 of non-GAAP EPS in Q2, which was in line with our prior year and above our outlook for the quarter.
The lapping of tighter driven volumes high winds in the prior year was offset by cost efficiencies plus of unexpected volume.
Net benefit of share repurchases during the quarter.
A portion of the EPS upside was driven by the timing of our expense run.
We continue to invest in our long term plan.
The short term macro uncertainty.
We generated a GAAP loss per share of 96.
Primarily driven by losses in our investment portfolio due.
Due to ongoing market volatility.
Turning to capital allocation.
We generated $466 million of.
Our free cash flow in Q2, 150% due to the lapping of onetime working capital benefits associated with our managed payments migration on lower volume versus the prior year.
We ended the quarter with cash and non equity investments of $4 5 billion, along with gross debt of $7 7 billion.
After redeeming $605 million of notes during the second quarter.
We repurchased $1 3 billion of shares with an average price of approximately $51 during Q2.
More than three 4 billion remaining.
Our current authorization.
We also paid a quarterly cash dividend of $121 million in June of.
About <unk> 22 per share.
A repetitive reduced outstanding shares by roughly $45 million.
Last three quarters net of dilution.
Despite the dynamic macro environment, we remain balanced and disciplined in our approach to capital allocation.
The launch of <unk> by bolt on investments and frankly, the acquisition of nine origin.
PSA authentication partnership a few recent examples of our build by partner framework, helping us cover strategic objectives.
Our investment portfolio is detailed on slide 20.
Accuracy investment states were valued at approximately $4 billion at the end of Q2.
We sold roughly $370 million in aggregate.
Our banking, adding shares during the second quarter.
While market volatility impacted the value of our remaining space.
We will continue to manage our investment portfolio with an intensive maximizing shareholder value.
With the additional detail on our SaaS sales and remaining investment holdings.
Thank you.
Moving onto our outlook.
Our business has remained resilient in recent months, despite escalating macro headwinds for the operating environment remains dynamic and difficult to predict.
The spread of Covid balanced persistent supply chain issues elevated inflation and the impact of rising interest rates will likely weigh on consumer discretionary spend for some time.
<unk> and severity of the economic impact from the crime law unrelated sanctions are even more challenging to anticipate.
Given our outperformance in Q2 relatively stable volume trends as we progressed through the quarter.
We are maintaining our outlook from FX neutral <unk> between 12, and 10% for the full year.
While we land in that range will likely to determine whether the current macro headwinds held steady intensified will subside.
Additionally, recent currency movements with a sort of incremental FX headwind of roughly $500 million for 2022 JV versus our prior outlook.
On a spot basis, our guidance translates to full ESPN.
Between $72 seven to $74 7 billion.
Our hedging programs should help us mitigate the incremental FX impact to revenue operating income and EPS.
Our revenue outlook for 2022 remains unchanged between nine six and $9 9 billion.
Representing the FX neutral decline of between 6% and 3% or 6% to seven foster from volume growth.
We also maintain our non-GAAP operating margin target of between 29 and 30% for the full year.
We now expect non-GAAP EPS of between $3 95.
$4 10.
Raising the low end of our prior range by five.
Welcome to Q3 guidance.
We expect to generate between 17 and $17 $6 billion of J&J represents an FX neutral decline between 9% and 6%.
We anticipate revenue between $2 two nine from $2 $3 7 billion.
For a decline of between five 2%.
We forecast our non-GAAP operating margin of between 27, and 28% as we continue to invest in our marketing and product experience initiatives to support focused categories and horizontal marketplace innovation.
We expect to deliver non-GAAP earnings per share of between 89 and 95.
Representing growth of negative 1%.
Positive 6%.
In closing Q3 was a strong quarter for ebay, we exceeded expectations across all key financial metrics, despite facing challenging macro headwinds in recent months.
Our fortress balance sheets, and durable financial model for us in the fortunate position to continue investing in long term growth initiatives, while delivering robust earnings and free cash flow amidst an uncertain macro environment.
You guys track record of shareholder friendly capital allocation continued as we returned over $1 4 billion.
Through share repurchases and cash dividends this quarter.
The timing of payments teams continue to innovate with new services and capabilities, which are driving revenue in excess of volume growth at healthy incremental margins.
And I'm, particularly proud of our team's focus and financial discipline, which has enabled us to remain on track to reach our ambitious impact falls in climate reduction targets. During this period of economic uncertainty.
Fostering sustainable business practices, and enabling equitable inclusive entrepreneurship have never been more important.
Today.
Finally, I want to express my sincere gratitude to our dedicated <unk> employees to continuously striving to deliver a better future for our customers.
Global community and our planet.
With that Jamie and I will now take your questions.
At this time I would like to remind everyone in order to ask a question press star followed by the number one on your telephone keypad.
Your first question is from the line of Ross Sandler with Barclays. Your line is open.
Hey, guys just.
Just maybe start with the macro I guess this one is for.
So your full year Gms growth ex FX Hasnt changed from the last quarterly call. Despite what looks like fairly meaningful deterioration for consumers in Germany, and UK from what we heard from a lot of other companies. So.
Maybe could you just help us with what you.
You saw in terms of linearity throughout <unk>, what youre seeing thus far in <unk>.
Baked into the second half GMB growth.
And then a question we often get from folks is how much of your GMB is discretionary.
What would be considered maybe non discretionary I need help with that would be great. Thanks, a lot guys.
Hi, good afternoon locked yeah, I'll take that one first of all I wanted to say how pleased I am.
With both the results on the execution.
<unk> during the second quarter.
Does it in the prepared comments as you would imagine as we look to the rest of the year, we've been very thoughtful about the guide.
And.
Taking account of the current environment.
As I think about it there's three significant considerations.
Then we've taken into account and expect to continue throughout the rest of 2022. The first thing the impact of the volume decline.
Which has a disproportionate impact on the European business because of the proximity to Ukraine.
Pressure on energy prices.
Currently the supply chain constraints, which are having an impact on our cross border trade and again, we expect those to prevail through the rest of the year and then thirdly, just really thinking about the broader macro.
Backdrop, why are we seeing elevated inflation rising interest rates, which are having associated impacts on consumer discretionary spend that we're putting pressure.
As we've considered that we've put a broader range than we ordinarily would.
In the second half of the year to take a chance of that.
<unk> three <unk>.
Significant items on ultimately, where we land within our guidance range will be determined how that macro environment is not as macro headwinds.
Both out of the second half of the held steady.
Intensify or indeed, whether they subside.
With regard to.
The specific carriers such as GM V. We obviously have a very.
Global and significant business.
Across the globe, we started half growth rate and we have no material FMC Jade.
There is a broad base of countries I wouldn't point to any.
A specific area.
With standout for me, perhaps JV.
Yes, I think it's hard to differentiate discretionary versus non discretionary I think if you go back to Investor day, you'll see that we had five five big areas over $10 billion. So.
Obviously when times are tough people trade down and that's where our kind of our refurbished helping out et cetera.
So hard to kind of pull that out, but I would say as Steve said, we don't have grocery or material item <unk> on the site.
Okay.
Thank you.
Your next question is from the line of Nikhil does <unk> with Bernstein. Your line is open.
Hi, there thanks for taking the question.
Nice to see that in Q2 margin beat can you just talk about what got better in the quarter versus your expectations was there any delay of certain investments that are now taking place in the third quarter or did you realize incremental efficiency gains there and then as a second question.
How are you thinking about focus category growth going forward relative to the rest of the GNP base. Thanks a lot.
<unk> I'll pick up the first part and then China.
Perhaps can pick up the second with regard to the second quarter as you would anticipate.
We continue to lead in terms of operational efficiencies in the short term, while we do continue to invest for the long term to drive that long term sustainable growth that we talked about at our investor event back in March.
Candidly, it's really a reflection of timing we had expected some incremental ramp of expenditure allows us through those investments in the second quarter. Some of that will ramp in the third quarter and Thats why youre seeing us hold.
Our full year margin guidance intact for the full year, Jeremy perhaps you'd like to cover the focused categories costly. Yes look we're pleased with the outperformance of focus category as being nine points above the rest of the business importantly, we're continuing to invest we've rolled out Julie.
This quarter with a partnership with Gia.
For jewelry over $500, we expanded what we're doing in handbags launching that in Germany bring accessories things like wallets into the U S.
Expanded referred to additional categories headphones audio gaming console smart smart home devices. So we're continuing to invest in our focus categories.
As I've always said, it's not a one and done I mean, if you think about the launch of vault and the incremental authentication that we've launched and collectibles that was a category. We started on as a focus category more than a year ago. So we're going to continue to innovate both on the existing ones that are there and launch new ones like we did with the with jewelry this quarter.
Your next question is from the line of Doug Anmuth.
With Jpmorgan your line is open.
Thanks for taking the question I just want to follow up on focused categories and ask about the ball.
<unk> recently launched I know, it's early but just curious how consumer.
Reaction has been so far and what engagement.
As look like and just how youre thinking about kind of monetization there going forward. Thanks.
So it's early days as you said, but we're excited by the initial feedback from the early customers.
So it is having the intended impact which is giving them a frictionless frictionless way to buy.
<unk> sell on the platform to encourage sellers to use it because obviously, there's a first mover advantage. We think once the product is in the mall.
It's unlikely to move to a different vault or there can be withdraw so we've reduced fees through the end of the year on things like storage and selling fees in order to encourage adoption.
And we're kind of right on track with where we thought we're going to continue to innovate add more categories and more products over time, but a good early start to the program.
Thank you.
Your next question is from the line of Colin Sebastian with Baird. Your line is open.
Thanks, Good afternoon, guys. Good of course to see the progress here on the platform.
Jimmy I know you've been asked this before but just reflecting on the past quarter or last few months do you think the marketplace is benefiting all from consumers trading down a bit just given the pressures on the pocket book right now sort of a counter cyclical benefit and then.
Steve you mentioned growing awareness on the platform and I'm, just curious how you're evaluating that as their data youre looking at and things like traffic to the site or our other signals that might not yet be showing up in volume and monetization that we might expect to see down the line a bit. Thank you.
Yes, so on the first one on the kind of countercyclical I am really happy we refocused our strategy towards non new in season.
$2 five years ago, because it is we're leaning into the opportunities of where the consumer I can be it makes the platform more resilient. So we are seeing strength in things like our refurbished category, where consumers can trade down and frankly, just the value of ebay of having non new in season makes makes the platform a little bit more.
Over time as well as selling is important.
In tough times for consumers because as I've said, all along they have got $4000 of stuff in the house that they could sell.
And they.
Less than 20% of that is online. So we're essentially working to kind of lean into both on your question on awareness around our spend we do look at everything in a buyer's traffic et cetera, but one thing we measure pretty religiously as kind of initial consideration of.
What we are doing so what you've seen us do is shift from doing a lot of lower funnel to more full funnel marketing.
Think about us being at the New York parts, Joe what we're doing in collectibles with the MLB All star game.
Next week, you'll see us launch a program in the UK with Tim.
Pimp My ride, which is really focused on our parts and accessories.
And being we're enthusiasts are and what we're really doing there is focusing on ebay and initial consideration set and really talking about these value propositions that we're building through two focus categories and what I'd say is we're excited about the initial results from the early movements nics in the campaigns that we're running.
Okay. Thank you.
Okay.
Your next question is from the line of Stephen Ju with Credit Suisse. Your line is open.
Okay. Thank you Jamie.
Trading cards.
Obviously, we received all the investor attention, perhaps within collectibles, but.
Is there anything you can highlight in terms of other potential collectibles categories, where you can start, bringing the higher focus and perhaps default offering.
Maybe stamps coins or comic books through other things and what the potential size of those some of those other categories might be and I guess secondarily.
Unknown origin, I guess granted this is definitely one for the mid to longer term, but.
It's our understanding that they are happier platforms out there that will allow for trading of digital goods, primarily probably more with video game and in game items.
And those have been in existence for some time and does it seems to have been an area, where ebay has really never felt the need to participate. So why is now the right time to enter this vertical.
Yeah, So I'd say a couple of things first on the collectibles business.
Yes, we've leaned into lots of trading cards because of the opportunity that we see in that market, but if you go back to Investor day, when we size the collectibles business, it's over $10 billion category. So there's lots of different elements in there and frankly lots of different elements geographically, so theres things stronger in our UK and German business.
We're trading cards. This is more of a U S phenomenon from that perspective, because collecting is interesting regionally. Although there is a good amount of cross border trade. When it comes to collect a also were to continue to invest in and collectibles and broadly as a category.
Unknown origin. It is really a key part of that is the talent that we're bringing in if you look at the team there. They are really the founding some of the founding pioneers and the early work around it.
<unk> and digital and so bringing that directly into EBIT I think really helps us as we think about the intersection of physical and digital some of the pieces that Jordan outline at Investor day, because ebay has been always the place where people go to collect phase and so being able to figure out how to bring them onto the platform I think is the key.
The advantage I would say, it's really early days, but I think we found a great amazing team that we're integrating into the into the business.
Yeah.
Thank you.
Your next question comes from the line of Eric Sheridan with Goldman Sachs. Your line is open.
Thanks, So much for taking the question you to come back to the Analyst day, you guys talked about the ability to continue to innovate around the marketing platform for yourselves over the medium to long term and any update on how you're thinking about advertising solutions continuing to innovate and change on the platform for sellers and how we should be.
Thinking about investments versus the cadence of rollout of some of those.
Potential products in the.
<unk> ahead, thanks, so much.
And I assume when you mean advertising solutions, you mean, what we're doing to bring traffic to the site not the advertising product on the site.
So on the marketing side.
Yes, we've absolutely been doing a shift both kind of moving more towards mid funnel.
Going after more paid social young.
Younger demographics in terms of what we're doing with Tic Toc and those types of programs and we have been enhancing what we're doing from a marketing perspective rolling out a new marketing technology called we call. It user experience platform to help us be much more efficient with that as it relates to specifically to sellers I'd point to two things first is the investments.
That we're making in external promoted listings so im having sellers that are invested in our promoted listings product be able to generate specific traffic to their business and then the second thing is all the work that we've done over the last probably 18 months around.
E Bay stores about letting them grow the brand in the marketplace about letting them incorporate videos into their experience around letting them spend coupons to interested or repeat buyers on the platform because we see it is twofold, one is being able to drive traffic there, but also helping them drive their repeat business on ebay, which is why.
We have been making those investments also we think it's really critical to our second pillar of being the seller platform of choice. So we're going to continue to push forward on those types of innovations on behalf of our sellers.
Thank you.
Your next question is from the line of Tom Champion with Piper Sandler Your line is open.
Great.
Thanks, very much Jamie it sounds like Youre seeing steady spend out of the active buyers. Just curious how you would grade your ability to migrate mid tier buyers more into the to the active category.
And then Steve to Cherry pick one macro factor curious if you could talk about the recent decline in gas prices.
Yes.
Maybe any moderation in inflation curious if youre seeing any demand elasticities here as.
Potentially.
Inflation moderates in some areas. Thank you.
Yes. So we're excited by what we're seeing in terms of the spend per buyer. So if you look at.
Versus 2019, our spend per buyer for enthusiasts buyers are actually up double digits and that ties right into what we're doing from a focus category strategy. The second thing that we're really focused on is that multiplier effect that we talked about at Investor day. The fact that our watches buyer will come in and spend $8000.
Watches, but $9000 and the rest of the site.
Our parts firewall by $500, but then by $700 outside of that and that helps us drive the strategy around what we what we're going after with enthusiast buyers and spend per buyer. It's also why we changed our marketing programs to be much more targeted requiring enthusiast buyers Steve you want to cover the second one.
Four months Stacey.
Well I would say is we have a truly global business with <unk> and obviously as we think about the impact of cross border talks about particularly glad to Chinese think about Europe .
More significantly here.
Energy prices, particularly associated with gas prices going up.
So your points about.
Slightly moderating gas prices, perhaps over here Chuck.
Choppiness on inflation, we're not seeing anything in particular.
And then finally changes to what we've laid out.
Yes, I would just add that when I talk to our our <unk> in Germany, and U K they get their gas bill twice a year in some cases once a year.
Definitely there is the impact there of that and I think thats part of why we see a bigger impact on our European business, then we at our international business than we do in the Americas.
Okay.
Thank you, yes, thanks, Tom.
Your next question is from the line of Lauren Schenker with Morgan Stanley . Your line is open.
Great. Thanks, I just wanted to ask about the marketing spend in the quarter were higher than I think we were all expecting.
How do I marry that with maybe the weaker than expected customer net adds as well and then how youre thinking about marketing spend more broadly in the back half of the year is that something that you would pull back if the macro does deteriorate further.
Hi, Lauren I'll pick that one up is really a function of <unk>.
And I'll tell you when you sort of look at where we are in.
I think our bifurcated two one is the marketing spend.
As a function of season by quarter, and then secondly, why not think about buyers. It's a trailing 12 month metric.
Obviously, we're lapping through the pandemic from last year with data with us.
Right some macro environment solid project.
And so there is nothing specific about a point to in terms of the linkage between the two areas.
Your next question comes from Justin Post with Bank of America. Your line is open great.
Great. Thank you.
The revenues are definitely four points better than <unk> in the Q3 guidance. How do you think about that differential as payments ramps up towards 100% and can you maintain a nice differential there looking forward. After <unk> and then the second question just hedging it looks like it's helping a little bit this year.
How much is it helping it might be in some disclosure I didn't see and is that going to be helpful. In 'twenty three or is there a timeframe that we should be thinking about hedging helping you. Thank you.
Hi, Justin.
I'll pick those up.
Very pleased with the levels of execution that we've seen both in terms of ads business sometime its business and so as jamey alluded to in his prepared comments, we're seeing a 20% delta between advertising and volume in the second quarter and the payments team did a tremendous job executing items like buyer effects.
Additional forms of payments that continue to add potential for the revenue side to API, we also sort of lapping.
As we coming off the back of.
The payments migration that was completed in quarter four last year. So we are seeing some of the fiber on that but if I reflect on the second quarter, we had about a nine point delta between <unk> and revenue.
Split evenly between advertising and payments are little bit more pressure going forward as we lap through that dynamic with regards to your question around hedging the change to a very nice job of obviously of hedging.
<unk>, obviously is unhedged and we are seeing pressure because of the strength of the dollar plus is starting in Europe in recent months and Thats, why youre, saying implied $500 million impact on our <unk> guide.
Spotlight as we've gone forward, but it seems diligently work by hedging iwai on EPS as we go forward.
We go quarter by quarter year by year and make sure that we've got the balance slots as we do that.
Okay, great. Thank you.
Your next question is from the line of Deepak <unk> with Wolfe Research. Your line is open.
Great. Thanks. This is zach on for Deepak just curious on your AD business saw some reacceleration in the quarter just curious for an update on some of these newer product initiatives expressed in advance.
Can you just give us an update there in terms of adoption.
I'm just kind of a key driver of the Reacceleration or is it just still kind of broader adoption of the standard promoted listing product.
And then second on the kind of monetization of some of your investments just curious for how youre thinking about the end of Interstate here we've been.
Kind of monetizing some of the other assets over the past couple of quarters I know a good chunk of it is kind of locked up until end of next year, but just kind of any updated thoughts and philosophy around that specifically yes.
Yes, so first on the AD business Act.
We tend to provide a really good ROE as for our sellers. So.
There's still a lot of penetration opportunity in our promoted listing standard product.
And driving incremental adoption for more sellers across more of listings etcetera.
But we're pleased this quarter to really start seeing some traction in our newest products.
As I talked about on the call our newest products are up 30%.
On quarter, which is which is great to see.
This will lead to promoted listings, that's double digit in the coming quarters.
And of the three new products.
I would highlight advanced I think is a significant opportunity for us.
Cause of the monetization that it provides and because we still have a good ways to go in terms of driving adoption on the platform I would just say, it's a continual dialing frank in terms of optimizing the buyer experience the tools that we have.
The algorithms to make sure that we're not debating the buyer experience, we're enhancing it and continuing to provide a return on that salaries, but I'm happy to see the one 5% penetration we got to this quarter and like I said, the future quarters should allow us to drive double digit growth Steve do you want take the second one.
Absolutely.
We continue to be very balanced and thoughtful about capital allocation, we got a long track record of creating and maximizing long term shareholder value as we've gone through that.
Probably aware in the second quarter, we divested of some of our holdings in adjuvant cacao, specifically with regards to your question around other venture we have 33%.
Indeed, 25% of that is tied up until later in 2023, and we continue to reflect on our investments whether we believe we can generate incremental value in the short term by selling them a holding on for this longer.
It continues to drive that shareholder value. So we'll reflect on all of our investments that will be very diligent about how we think about it. So ultimately drive long term shareholder returns.
Great. Thank you.
Your next question comes from the line of John Blackledge with Cowen Your line is open.
Alright, great. Thanks.
Two questions first on ebay live did you kind of discuss the early learnings engagement and how we should think about this program ramping as we head towards the fourth quarter and holiday season, and then secondly, a follow up on on advertising you've mentioned.
Promoted listings re accelerating to 10% plus growth.
Any update there on timing for when it gets back to double digits. Thank you.
Yeah. So on ebay live our lives shopping pilots I would say, it's early John were kind of in the test phase of that.
And it's really about learning.
About how ebay engages the best way to get customers engaged I would say from our early tests that we're excited by what we saw both in terms of the time people were engaged to engage 15 minutes in a video, especially with today's attention span of consumers.
And the interaction we had a quarter people like interacting with the experience. So we feel really good about what it can be.
As you've seen from a macro standpoint, it's had a lot more traction.
In the Asia region than it has here, it's still much more of a nascent technology above first and well with some of the categories like some of the other parts that we have so I'd just say very early testing and learning at this stage.
On advertising, what we've talked about is getting to a double digit growth in the coming quarters, and we feel comfortable about our plans to do that really on the strength of our core product and standard and on the growth that we're seeing out of our out of our new products.
Thank you.
Thank you.
Your next question is from the line of Lee Horowitz with Deutsche Bank. Your line is open.
Great. Thanks for the questions you guys laid out.
Some helpful ambitious long term targets for Jim B growth at your analyst day.
I guess, how do you think about how the current macro environment impacts the timing by which you guys look to to achieve these goals and then maybe on the parts and accessories specifically.
Can you provide any update on how the playbook is rolling out across this category have you started to yes.
The return on investment whereby youre getting accelerated growth across these categories, given what you've done over the last couple of quarters.
<unk> and parts and accessories. Thanks, so much.
Hi, Larry I'll take the.
Yes.
Longer term plan question.
We obviously update to the market for our Investor day back in March and our long term guidance remains unchanged we.
We are continuing to execute whether it's through the focused category playbook ads payments building, Florida Trust on the platform and driving fees that so I'm really pleased what we've.
Same quarter after quarter and the levels of execution that we've seen with the teen undoubtedly we are navigating.
A particularly challenging macro environment, which we believe is transitory and so the way that we think about this as a duration and the severity of the current macro environment already points the timing the medium term propulsion and GMP, but we continue to be very aligned.
Im confident about the long term trajectory that we laid out on our <unk>.
Today, a specific thing with.
Deposit accessories, Jamie Yes, we're really we're really pleased with what we're seeing in terms of the rollouts on parts and accessories I'd say both from a.
Marketing standpoint, so we're getting aggressive in our key markets about driving initial considerations that I talked earlier about some of the stuff. We're doing with sponsorship of pimp. My ride. We did the same thing with EDA ebay auto parts show in New York those types of things led to 3 billion media impressions for us from that standpoint.
<unk> talked about really going after that enthusiast leaning into things like.
I was just out in our European markets and they are certified green parts are incredibly important and we continue to add more of that supply onto the marketplace and then secondarily I just stay on the product side improvements in fitment improvements in the organization of the inventory and the collaboration is important we enhanced some of the AI that powers our.
Search and our merchandising and our advertising really around this idea of fitment and how to make sure that we have 100% trust in the fitment on the products. So we're excited about what we're seeing in the results. The movement that we're seeing an initial consideration set.
And we're not going to be done this is going to be a category that we're going to continue to innovate on quarter after quarter.
Great. Thanks, so much.
Operator, we've got time for one more please.
Your final question comes from the line of Richard Kramer with Arete Research. Your line is open.
Mr. Kramer your line is open.
Sorry, sorry, I was on mute Jamie.
Jamie.
As a follow up I'm, a little surprised by the comparisons to 2019 I guess my question is are you looking back at the pandemic period in thinking that.
Some of the changes that we saw in consumer behavior are now getting reversed and given how much you've talked about focused category should investors expect a further retreat from general merchandise, especially given how difficult the economic backdrop and maybe one quick one for Steve.
Could you reflect a little bit on the cost base and the execution culture ebay, we've seen the large shopping it's still in beta Offsite ads are stealing data. It seems like things are taking time to get to get out to a full.
General availability is it something that you think is requiring more investment in the short term and it's worth it just to make sure that you actually get some of these new initiatives up and running.
Yeah. So on the first one part of the reason why we look at.
<unk> is just the massive acceleration that we saw over the Covid time period, and kind of comparing the pre and post with the massive restriction in mobility and the stimulus that was there in the market.
Obviously, we believe.
We are definitely coming out of the pandemic much stronger than we came into it and our strategy is working to your question on focused categories.
Our focus category strategy is really focused on non new in season. So we've kind of really moved away from new in season, you can still honestly buyer on the site and we have that product, but we're leaning into where ebay is strong if I go back to the.
Investor Day, it's a $1 one trillion Tam growing to $1 four trillion and we think given the tougher time.
Economic times right now our strategy of where we're focusing from that category standpoint.
<unk> is exactly what we need to be and it's frankly, a strength for ebay you want to take the third one Steve Richardson I'd make a few comments first of all I think on our broader cost structure. The teams have been incredibly diligent, particularly as we cycle through this macro environment and that creates capacity for us to invest in the long term.
Everybody to ebay's looking through that lens secondly.
I really believe the pace of innovation is moving much.
Much quicker than it was pre pandemic, we talked about the speed of <unk>.
Device and the focused categories.
Think about the execution and payments.
And the size of the ratio.
It's about at Investor Day, and then the growth that we see in our advertising business.
Thirdly, I would say the unrealized the Eddie Garcia.
Back to ebay heading up the product organization.
Im bringing his wealth of experience years' of experience the same really drive best in class product choices we.
We remain very optimistic about the.
The future ahead of us and I'm really pleased with execution.
Okay.
Ladies and gentlemen, thank you for participating. This concludes today's conference call you may now disconnect.
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